Earnings Management Of Listed Companies And Major Shareholders Reducing Stocks Research Problem

China’s equity division reform has a great influence on the development of China’s capital market, which resolves the securities market "a dominant" and "stock with different rights" problems, marks China’s securities market going into the era of full circulation. Equity division reform gives the circulation right to all stocks, including no-circulation-right stocks, which optimize the equity structure of listed companies, improves the efficiency of the securities market resource allocation and the level of corporate governance. It brings a lot of positive significance to stock market. But because China’s equity division reform is unprecedented, no experience and example in the past, which also brings new problems to stock market, such as earning management and major-shareholders-reducing problems. This has a great influence on stock market. These new problems have become critical problems to the stability of capital market development. Thus, the research of earning management and major shareholders reducing stocks problem has important practical significance and theoretical value. This article studies on more than 200 listed companies existing from 2007 to 2012. Using the empirical research, it investigates the relationship between major shareholders reducing stocks behavior and earning management, and the relationship between positive earnings management and the stock prices.In this article, first, it introduces the background of equity division reform and points out the history problems that has been resolved by equity division reform. Then, it puts forward the problems caused by the equity division reform, such as the major shareholders making profit by manipulating the stock price with earning management. Second, it reviews the newest research results and documents about earnings management and major shareholders reducing stocks problems. Then it concludes the relationship between positive earnings management and major shareholders reducing stocks, the relationship between earning management and stock price according to the research results. Third, it launches empirical test to check the theory conclusion, then it puts forward policy suggestions. Through the research review, it finds that there were significantly positive correlation between earning management and stock prices. For excess profits, the major shareholders may manipulate earning management before reducing stocks. But this phenomena are indistinct, which meaning the positive earning management has a very restrict influence on the major shareholders reducing stocks.This article enriches the existing research results, and puts forward some certain theory reference for policy makers and regulators. But because the existing China’s listed company earnings management research result and the actual application are still in the primary stage, the research on the earnings management and major-shareholders-reducing stocks still has some certain restriction, especially in the quantitative analysis and practical application, these aspects still need further research and perfect.